EX-99 2 a5904648ex99.htm EXHIBIT 99

Exhibit 99

Psychiatric Solutions Reports Financial Results for Fourth Quarter 2008

Extends Maturity of Revolving Credit Facility to December 2011; Adjusts Guidance for 2009 Earnings per Diluted Share to Range of $2.24 to $2.32

FRANKLIN, Tenn.--(BUSINESS WIRE)--February 25, 2009--Psychiatric Solutions, Inc. (“PSI”) (NASDAQ: PSYS) today announced financial results for the fourth quarter and year ended December 31, 2008. Revenue increased 12.0% for the quarter to $445.9 million from $398.1 million for the fourth quarter of 2007. Income from continuing operations was $24.6 million, or $0.44 per diluted share, for the fourth quarter of 2008 compared with $23.2 million, or $0.42 per diluted share, for the fourth quarter of 2007.

For the year ended December 31, 2008, revenue rose 20.9% to $1.766 billion from $1.461 billion for 2007. Income from continuing operations increased 39.4% to $107.9 million from $77.4 million. Income from continuing operations per diluted share was $1.92 for 2008, up 38.1% from $1.39 for 2007. Results for 2007 included a loss on debt refinancing of $8.2 million, or $0.09 per diluted share after tax.

The fourth quarter 2008 results included a negative impact of $0.05 per diluted share related to one of the Company’s facilities in Chicago and $0.05 per diluted share related to an increase in the Company’s reserves for professional and general liability coverage resulting from PSI’s annual actuarial assessment of claims. Professional and general liability insurance expense increased during 2008 compared to 2007, primarily as a result of an increase in PSI’s reserves for self-insured professional and general liability related to the revised assessment of certain claims at amounts higher than those originally anticipated and the actuarial implications of such revisions.

Same-facility revenue for the fourth quarter increased 7.8% versus the fourth quarter of 2007 and increased 8.0% for full-year 2008 versus 2007. For the quarter, growth in same-facility revenue was driven by a 6.5% increase in same-facility net revenue per patient day and a 1.3% increase in same-facility patient days. Same-facility EBITDA margin was 18.7% for the fourth quarter of 2008 compared with 21.0% for the fourth quarter of 2007 and 20.8% for full-year 2008 versus 20.5% for the prior year. Consolidated adjusted EBITDA increased to $74.6 million for the fourth quarter of 2008 from $71.7 million for the fourth quarter of 2007 and full-year consolidated adjusted EBITDA was $312.9 million compared to $254.4 million for 2007. A reconciliation of all GAAP and non-GAAP financial results in this release can be found on pages 7 and 8.

PSI today adjusted its guidance for 2009 earnings from continuing operations per diluted share for 2009 to a range of $2.24 to $2.32, reflecting growth of 17% to 21% compared with 2008. The Company’s guidance does not include the impact from any future acquisitions.

Joey Jacobs, Chairman, President and Chief Executive Officer of PSI, remarked, “PSI’s business fundamentals remain strong, with substantial same-facility revenue growth during 2008, the successful addition of approximately 500 beds to new and existing facilities for the year, a robust pipeline of potential facility acquisitions and an improved financial position through the extension of our revolving credit facility maturity. Our adjustment to 2009 guidance primarily reflects an increased level of caution regarding the potential impact of the recessionary economic environment on our business.”

The Company also today announced that it has extended the maturity of $200 million of its revolving credit facility to December 31, 2011. The remaining $100 million will mature on December 21, 2009 as originally scheduled. The revolver, which currently has an outstanding balance of approximately $195 million, is now priced at LIBOR plus 5.25% and has an unused commitment fee of 0.75%.

Brent Turner, Executive Vice President, Finance and Administration, discussed the refinancing, “We are extremely pleased to be able to extend our revolving credit facility at a time when financial institutions have become more prudent in their credit decisions. We appreciate the commitment from the banks and are pleased that our financial performance continues to validate their support. With substantial net cash from operating activities expected for 2009, we are confident of funding our business plan for 2009, including further debt reduction.”

PSI will hold a conference call to discuss its fourth quarter financial results at 10:00 a.m. Eastern time on Thursday, February 26, 2009. A live webcast of the conference call will be available at www.psysolutions.com in the “Investors” section of the site or at www.earnings.com. The webcast will be available through the end of business on March 13, 2009.

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements other than those made solely with respect to historical fact and are based on the intent, belief or current expectations of PSI and its management. PSI’s business and operations are subject to a variety of risks and uncertainties that might cause actual results to differ materially from those projected by any forward-looking statements. Factors that could cause such differences include, but are not limited to: (1) general economic and business conditions; (2) PSI’s ability to comply with applicable licensure and accreditation requirements; (3) risks inherent to the health care industry, including government investigations, the impact of unforeseen changes in regulation, decreases in reimbursement rates from federal and state health care programs or managed care companies and exposure to claims and legal actions by patients and others; (4) the ability to receive timely additional financing on terms acceptable to PSI to fund PSI’s acquisition strategy and capital expenditure needs; and (5) PSI’s ability to improve the operations of its inpatient facilities and successfully integrate recently acquired operations. The forward-looking statements herein are qualified in their entirety by the risk factors set forth in PSI’s filings with the Securities and Exchange Commission. PSI undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof.

PSI offers an extensive continuum of behavioral health programs to critically ill children, adolescents and adults and is the largest operator of owned or leased freestanding psychiatric inpatient facilities with over 10,000 beds in 31 states, Puerto Rico and the U.S. Virgin Islands. PSI also manages freestanding psychiatric inpatient facilities for government agencies and psychiatric inpatient units within medical/surgical hospitals owned by others.

 
 
PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except for per share amounts)
           
Three Months Ended December 31, Year Ended December 31,
2008 2007 2008 2007
 
 
Revenue $ 445,863 $ 398,114 $ 1,765,977 $ 1,460,679
 

Salaries, wages and employee benefits (including share-based compensation of $4,901, $4,098, $19,913 and $16,104 for the respective three and twelve month periods in 2008 and 2007)

245,509 222,434 971,284 812,505
Professional fees 45,504 40,365 179,307 144,895
Supplies 23,319 21,985 95,088 80,170
Rentals and leases 5,528 5,843 23,181 20,404
Other operating expenses 47,713 33,285 169,562 136,912
Provision for doubtful accounts 8,630 6,611 34,606 27,482
Depreciation and amortization 10,739 8,868 40,309 30,756
Interest expense 19,208 21,312 78,648 74,978
Loss on refinancing long-term debt   -     -     -     8,179  
  406,150     360,703     1,591,985     1,336,281  
Income from continuing operations before income taxes 39,713 37,411 173,992 124,398
Provision for income taxes   15,091     14,251     66,117     47,034  
Income from continuing operations 24,622 23,160 107,875 77,364
Loss from discontinued operations, net of taxes   (601 )   (9 )   (2,922 )   (1,156 )
Net income $ 24,021   $ 23,151   $ 104,953   $ 76,208  
 
Basic earnings per share:
Income from continuing operations $ 0.44 $ 0.42 $ 1.94 $ 1.42
Loss from discontinued operations, net of taxes   (0.01 )   -     (0.05 )   (0.02 )
Net income $ 0.43   $ 0.42   $ 1.89   $ 1.40  
 
Diluted earnings per share:
Income from continuing operations $ 0.44 $ 0.42 $ 1.92 $ 1.39
Loss from discontinued operations, net of taxes   (0.01 )   -     (0.05 )   (0.02 )
Net income $ 0.43   $ 0.42   $ 1.87   $ 1.37  
 
Shares used in computing per share amounts:
Basic 55,676 54,823 55,408 54,258
Diluted 56,428 55,743 56,267 55,447
 
 
PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
       
December 31,
2008 2007
 
 
ASSETS
Current assets:
Cash and cash equivalents $ 51,271 $ 39,970
Accounts receivable, less allowance for doubtful accounts of $48,882 and $35,398 for 2008 and 2007, respectively
248,236 230,600
Prepaids and other   101,363   68,235
Total current assets 400,870 338,805
Property and equipment, net of accumulated depreciation 836,223 692,135
Cost in excess of net assets acquired 1,201,492 1,071,275
Other assets   66,175   75,889
Total assets $ 2,504,760 $ 2,178,104
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,401 $ 30,996
Salaries and benefits payable 85,813 82,101
Other accrued liabilities 76,542 61,861
Current portion of long-term debt   34,414   6,016
Total current liabilities 232,170 180,974
Long-term debt, less current portion 1,280,006 1,166,008
Deferred tax liability 69,471 49,131
Other liabilities   28,271   23,090
Total liabilities 1,609,918 1,419,203
Minority interest 4,957 4,159
Total stockholders' equity   889,885   754,742
Total liabilities and stockholders' equity $ 2,504,760 $ 2,178,104
       
 
PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Year Ended December 31,
2008 2007
 
Operating activities:
Net income $ 104,953 $ 76,208

Adjustments to reconcile net income to net cash provided by continuing operating activities:

Depreciation and amortization 40,309 30,756
Amortization of loan costs and bond premium 2,213 2,151
Share-based compensation 19,913 16,104
Loss on refinancing long-term debt - 8,179
Change in income tax assets and liabilities (5,034 ) 8,639
Loss from discontinued operations, net of taxes 2,922 1,156
Changes in operating assets and liabilities, net of effect of acquisitions:
 
Accounts receivable (16,756 ) (13,387 )
Prepaids and other current assets (4,175 ) 6,093
Accounts payable 2,388 (7,517 )
Salaries and benefits payable 1,723 2,351
Accrued liabilities and other liabilities   (5,866 )   (6,346 )
Net cash provided by continuing operating activities 142,590 124,387
Net cash (used in) provided by discontinued operating activities   (807 )   1,134  
Net cash provided by operating activities 141,783 125,521
 
Investing activities:
Cash paid for acquisitions, net of cash acquired (166,156 ) (462,820 )
Capital purchases of property and equipment (123,985 ) (73,222 )
Other assets   (1,318 )   (2,451 )
Net cash used in continuing investing activities (291,459 ) (538,493 )
Net cash provided by discontinued investing activities   5,244     1,909  
Net cash used in investing activities (286,215 ) (536,584 )
 
Financing activities:
Net increase (decrease) in revolving credit facility 149,333 (21,000 )
Borrowings on long-term debt - 481,875
Principal payments on long-term debt (6,067 ) (41,281 )
Payment of loan and issuance costs (59 ) (6,661 )
Refinancing of long-term debt - (7,127 )
Excess tax benefits from share-based payment arrangements 3,052 9,428
Proceeds from exercises of common stock options   9,474     17,279  
Net cash provided by financing activities   155,733     432,513  
Net increase in cash 11,301 21,450
Cash and cash equivalents at beginning of the period   39,970     18,520  
Cash and cash equivalents at end of the period $ 51,271   $ 39,970  
 
Effect of Acquisitions:
Assets acquired, net of cash acquired $ 172,875 $ 518,348
Liabilities assumed (5,719 ) (37,826 )
Common stock issued (1,000 ) (9,000 )
Long-term debt assumed   -     (8,702 )
Cash paid for acquisitions, net of cash acquired $ 166,156   $ 462,820  
         
 
PSYCHIATRIC SOLUTIONS, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(Unaudited, in thousands except for per share amounts)
 
Three Months Ended December 31, Year Ended December 31,
2008 2007 2008 2007
 
Net income $ 24,021 $ 23,151 $ 104,953 $ 76,208
Plus reconciling items:
Discontinued operations, net of taxes 601 9 2,922 1,156
Provision for income taxes   15,091   14,251   66,117   47,034

Income from continuing operations before income taxes

39,713 37,411 173,992 124,398
Loss on refinancing long-term debt   -   -   -   8,179

Adjusted income from continuing operations before income taxes

39,713 37,411 173,992 132,577
Adjusted provision for income taxes   15,091   14,251   66,117   50,126

Adjusted income from continuing operations(a)

$ 24,622 $ 23,160 $ 107,875 $ 82,451
 

Income from continuing operations per diluted share

$ 0.44 $ 0.42 $ 1.92 $ 1.39

Adjusted income from continuing operations per diluted share

$ 0.44 $ 0.42 $ 1.92 $ 1.49
 
Diluted shares used in computing per share amounts 56,428 55,743 56,267 55,447
 
(a) PSI believes its calculation of adjusted income from continuing operations provides a better measure of the Company's ongoing performance and provides better comparability to prior periods because it excludes items not related to the Company's core business operations. Adjusted income from continuing operations should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted income from continuing operations is not a measurement determined in accordance with accounting principles generally accepted in the United States and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.
         
 
PSYCHIATRIC SOLUTIONS, INC.
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA AND ADJUSTED EBITDA
(Unaudited, in thousands)
 
Three Months Ended December 31, Year Ended December 31,
2008 2007 2008 2007
 
Income from continuing operations $ 24,622 $ 23,160 $ 107,875 $ 77,364
Provision for income taxes 15,091 14,251 66,117 47,034
Interest expense 19,208 21,312 78,648 74,978
Depreciation and amortization   10,739   8,868   40,309   30,756
EBITDA(a) 69,660 67,591 292,949 230,132
Other expenses:
Share-based compensation 4,901 4,098 19,913 16,104
Loss on refinancing long-term debt   -   -   -   8,179
Adjusted EBITDA(a) $ 74,561 $ 71,689 $ 312,862 $ 254,415
 
(a) EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as income from continuing operations before interest expense (net of interest income), income taxes, depreciation and amortization. Adjusted EBITDA is defined as income from continuing operations before interest expense (net of interest income), income taxes, depreciation, amortization, and other items included in the caption above labeled “Other expenses”. These other expenses may occur in future periods but the amounts recognized can vary significantly from period to period and do not directly relate to the ongoing operations of our health care facilities. PSI’s management relies on EBITDA and adjusted EBITDA as the primary measures to review and assess operating performance of its facilities and their management teams. PSI believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management. Management and investors also review EBITDA and adjusted EBITDA to evaluate PSI’s overall performance and to compare PSI’s current operating results with corresponding periods and with other companies in the health care industry. You should not consider EBITDA and adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Because EBITDA and adjusted EBITDA are not measures of financial performance under accounting principles generally accepted in the United States and are susceptible to varying calculations, they may not be comparable to similarly titled measures of other companies.
     
 
PSYCHIATRIC SOLUTIONS, INC.
OPERATING STATISTICS - OWNED FACILITIES
(Unaudited)
(Revenue in thousands)
 
Three Months Ended December 31, %
2008 2007 Change
Same-facility results:
Revenue $ 383,937 $ 356,131 7.8 %
Admissions 37,735 36,569 3.2 %
Patient days 652,052 643,673 1.3 %
Average length of stay(a) 17.3 17.6 -1.7 %
Revenue per patient day(b) $ 589 $ 553 6.5 %
EBITDA margin 18.7 % 21.0 % -230 bps
 
Total facility results:
Revenue $ 400,530 $ 356,131 12.5 %
Admissions 39,838 36,569 8.9 %
Patient days 681,477 643,673 5.9 %
Average length of stay(a) 17.1 17.6 -2.8 %
Revenue per patient day(b) $ 588 $ 553 6.3 %
EBITDA margin 18.5 % 21.0 % -250 bps
 
 
Year Ended December 31, %
2008 2007 Change
Same-facility results:
Revenue $ 1,437,569 $ 1,331,141 8.0 %
Admissions 145,567 139,175 4.6 %
Patient days 2,466,223 2,404,421 2.6 %
Average length of stay(a) 16.9 17.3 -2.3 %
Revenue per patient day(b) $ 583 $ 554 5.2 %
EBITDA margin 20.8 % 20.5 % 30 bps
 
Total facility results:
Revenue $ 1,589,903 $ 1,336,554 19.0 %
Admissions 164,675 139,825 17.8 %
Patient days 2,749,643 2,415,042 13.9 %
Average length of stay(a) 16.7 17.3 -3.5 %
Revenue per patient day(b) $ 578 $ 553 4.5 %
EBITDA margin 20.3 % 20.3 % 0 bps
 

(a)

Average length of stay is defined as patient days divided by admissions.

(b)

Revenue per patient day is defined as owned facility revenue divided by patient days.

CONTACT:
Psychiatric Solutions, Inc.
Brent Turner
Executive Vice President, Finance and Administration
615-312-5700